Telefónica Injects Cash into Mediaset’s Pay TV Unit

Spanish telecommunications giant Telefónica SA TEF.MC -0.48% has agreed with Mediaset MS.MI +1.68% SpA to inject €100 million ($136 million) into the Italian media firm’s pay-television business, Mediaset Premium, in exchange for an 11.11% stake in the unit, the two companies said Monday.

The agreement marks a first step in opening up the Italian loss-making pay-TV business to external shareholders, as the Italian broadcaster hopes to see others investing in it, Mediaset said.

Other potential investors include Al Jazeera and Vivendi SA VIV.FR -0.19% .

The agreement reflects an equity value of €900 million in a new company that will hold Mediaset’s pay-TV activities.

Mediaset said the deal marks “an important alliance…for future cooperation in [the two companies’] respective pay-TV activities in terms of technology, know-how and content.”

Analysts say the deal as a positive move for Mediaset, whose pay-TV business was struggling to find cash and has been losing money for years.

The equity value set up with Monday’s deal will be the starting point for talks with other investors interested in injecting money into Mediaset’s pay-TV division, analysts say. Mediobanca Securities analysts said the equity value was in line with expectations.

Mediaset Premium’s subscription revenue was €552 million in 2013, up 6% compared with the previous year. The company didn’t disclose its advertising revenue.

Monday’s deal comes just days after Telefónica agreed to buy Mediaset’s 22% stake in Spanish pay-TV platform Digital Plus, for €295 million.

Telefónica already has a foothold in Italy through its ownership of a minority stake in Italian telecommunications operator Telecom Italia SpA.

In a regulatory filing, Telefónica said it will make the investment in Mediaset Premium in coming months. The price paid puts an enterprise value on the unit of €800 million, Telefónica said.

Source:The Wall Street Journal